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Higher user fees, privatization, salary freeze needed: report

CTV Montreal
Published Friday, April 25, 2014 8:29PM EDT

The Couillard government should partially privatize Hydro-Quebec and the SAQ, freeze government salaries and hike user fees in order to put Quebec back on track, according to two experts hired by the Liberal government.

Luc Godbout, a Sherbrooke-based taxation academic and Claude Montmarquette, who teachers Economics at the University de Montreal, issued a set of recommendations that painted a bleak picture of the state of public finances in a report commissioned by the Liberal Couillard government even before officially taking office.

“It’s very difficult and you cannot escape it, you have to face it," said Montmarquette of the province's fiscal situation.

Only a drastic remedy may prevent the government from facing the financial consequences of a credit downgrade which would hike interest rates on money owed by Quebec. In 2013-2014, the government had to pay $10.8 billion in interest alone on its debt.

In their 40-page report, the duo propose selling a 10 percent stake in both Hydro Quebec and the provincial SAQ liquor monopoly. The proceeds should be put into the Generations Fund to reduce the debt, they argue.

The report also recommends a public service salary freeze and hikes in user fees, such as a non-indexed increase in daycare costs.

Only an ambitious austerity plan would allow the government to hope to reach a deficit of $1.75 billion in 2014-2015, a prelude to attaining a balanced budget in 2015-2016. The government must find $3.7 billion to get there, however.

The government has been overspending for 15 years, according to the report. "We have social programs that are more European with a taxation system that is more American," said Montmarquette.

He cited the low user fees currently in existence as a central problem.

"In medication I pay about 40 per cent, 60 per cent has to be paid by someone else even when they don't consume medication," he said, noting that students pay only 12 percent of the real cost of their education, while child care consumers pay 15 percent.

One Liberal cabinet minister was on hand to respond. "The economy is tough. We're going to have to make tough decisions. But we will make them. Mr. Couillard was very clear on that," said Minister Of Intergovernmental Affairs Jean-Marc Fournier.